Business environment is the combination of all the internal and external factors which can influence a business activities, these influencers are political, economical, social, technological, legal, environmental and other internal factors. In this project report various positive and negative impacts of these factors which influence McDonald's are discussed. McDonald's is an American fast food chain which operates in more than 120 countries which has respective strengths and weaknesses along with few opportunities and threats.
P4 Positive and negative impact of Macro environment on Business operations
Macro environment is the type of external environment which effects an organisation as a whole, their factors are external and nearly uncontrollable which effect an organisation's functioning and performance. These factors consist of competitors, taxation policies, customer preferences and cultures, changes in circumstances etc. These influencers include political, economical, social, technological, environmental and legal (Belás, 2014). There are few negative and positive impacts of every element of macro environment, similarly McDonald's is also affected by these factors which are described below:
Political Factor: Political factors include government policies which can have a considerable effect on activities of company due to new and rapidly changing laws and legislations. McDonald's deals in fast food industry which has always been targetted by the government in order to improve health situations.
- Positive Impact– In order to promote global trade, government has gave an opportunity to post file tax reforms and also has increased international business agreements which as resultant more cost efficient and beneficial for McDonald's.
- Negative Impact– Government in various countries has marked few standards for food industry in order to reduce obesityproblems and other health troubles. Most of the nations like Denmark and United Kingdom has taken an initiative for proper labelling systems. According to which every food producing company like McDonald's has to label all nutritional values on every food meal including sugar levels, fat levels and calorie content (Craig, 2012).
Economical Factor: Economical components are the set of influencers which effect on organisation's finance value, few of these factors are taxation policies, interest rates, labour and material costs etc.
- Positive Impact– McDonald's deal in numerous countries which has different laws in context of food producing companies, due to slow but stable economy of countries like United States McDonald's can grow and develop their business.
- Negative Impact– McDonald's deal in multiple countries hence, this factor can also be a negative influencer on its business activities because countries like United Kingdom and other European nations has unsafe economy which can affect sales revenue and profitability. Increasing unemployment and higher interest rates are the few other factors which negatively affect McDonald's growth (Deasy, 2015).
Social Factor: Social factors are personal influencers which effect on organisation's business by an individual's own preferences and choices. Few examples of these influencers are lifestyle, culture, backgrounds and status.
- Positive Impact – Due to improving lifestyle and increasing wealth of public, people are tend to use more branded food products in order to improve their social standards.
- Negative Impact– McDonald's delivers their fast food products in numerous countries which is contrasting as per customer demands and choices and to fulfil demands of each class and countries is a typical task to perform. Another negative social impact is increasing trend of healthy food products with low fat and organic ingredients. While dealing in fast food products, McDonald's has to face problems like low demand and revenue.
Technological Factor: Technological factors refer to technological advancements which are considered significant in order to attain success and growth (Deasy, 2016).
- Positive Impact– McDonald's is the leading fast food company due to which it has hired a team of professionals who look over research and developmental activities. In order to increase the sales, McDonald's has initiated online order fetching systems which increases their business automation. This company is also benefited by the social media marketing and improved media image.
- Negative Impact– Fast food industry is the most growing industry which increases competition, and in order to develop and grow competitors using the way more advanced technologies which negatively impacts McDonald's brand image.
Legal Factor: Legal factors are the laws and legislation of nations related to every activity a company is engaged in. influence the business activities. Here, McDonald's has to face various legal influencers as they deals in various products, activities and countries (Hamilton, 2015).
- Positive Impact– McDonald's is a extensive fast food brand who has thousands of individuals as their employees, and McDonald's fulfilling their all requirements and legislations of employment laws. McDonald's has provided a comfortable working environment to all their employees which help in building their brand image in the eyes of general public.
- Negative – As McDonald's serves non-vegetarian food too, they have to face certain laws about animal welfare regulations and health regulations. They have to train all their employees about food hygiene systems.
Environment Factor: Environmental factors are external ecological factors which influences a companies activities, few of the examples are changing weather, temperature, disastrous situations etc.
- Positive Impact– In the current scenario, the world is supporting sustainable business practices which emphasis on preserving environmental resources for future generations. McDonald's has developed a brand image which focus on optimisation of business activities which does not harm any environmental resources.
- Negative Impact– McDonald's have been facing issues regarding various green movements and initiatives that influences their business activities. McDonald's also need to fulfil its corporate social responsibilities which resultant to be as burden on their revenue.
P5 SWOT analyses of McDonald's
McDonald's is an American fast food company which operates operations in multiple countries such as United Kingdom, United States and countries of Asia and Europe. Founded in 1940 by Richard and Maurice McDonald's is a public limited company.
SWOT analyses includes ascertainment of strengths and weaknesses of an organisation which are internal influencers and identification opportunities and threats which are external influencers of a business entity. SWOT analyses of McDonald's is explained below:
- Strengths are the internal capabilities which help a business firm in achieving overall organisation's goals. McDonald's serves in over 120 countries and has one of the largest global network. They have around 37000 restaurants in form of franchisees globally. Due to the global network, McDonald's is benefited by economies of scale where they divide their fixed expenses like promotional activities and advertisement campaigns into many restaurant units (Strengths of McDonald's, 2013).
- Another strength of McDonald's is strong brand recognition, McDonald's has a recognizable brand name which attract thousands of customers every month. The organisation introduce new food products and market them with previous ones which reduces promotional expenses.
- McDonald's consider customer satisfaction as their main aim which they achieve by various efforts, improving digital capabilities is one of them. They always set a benchmark when it comes to introducing new innovative technologies.
- Marketing strategies of McDonald's focuses mainly on children and youth as they are highly influenced by fast food products.
- Dealing in fast food industry, McDonald's has to face various issues like unhealthy food image which has high fat and high calorie levels. Due to increasing global obesity problems and other health troubles, society has forced fast food companies to redesign their menu which should have low fat food options and use of organic and green products (Hilton, 2013).
- Due to strong competition in market of fast food industry, companies like Burger King, Subway, Wendy's etc. influence existing customer of McDonald's to change their choices and tastes.
- McDonald's is engaged in numerous lawsuits like trademark case and others which effects its brand image and also utilises a ton of financial resources in order to resolve these issues.
- According to various food bloggers, McDonald's has unbalanced food menu. They offers various meals which are not good for a customer's appetite, they has several dishes like fried and grilled food products in same meal which can influence a customer's health.
- Fast food industry is a developing industry as it attracts many customers. Change in living standards influence food choices, increase in average income of individuals lead to improving food habits.
- Globalisation is a phenomenon which enables various countries to trade with each other with less or no restrictions. McDonald's has grabbed the opportunity provided by globalisation and diverse their operations in around 120 countries. They have adopted the concept for franchisees and and opened their 31000 restaurants in numerous countries.
- McDonald's has launched few low cost produced which seems to be appropriate for all classes, these products are launched for some Asian countries. They have prepared a low cost menu which attracts a lot of prospect buyers who are now able to afford branded food products at such low prices.
- Marketing is the key of high sales, McDonald's has developed strategies which offers various discounts and free food schemes due to which every individual is forced to try their food atleast once. These offers also help them to fight through competition.
- By considering customer's changing choices and preferences, McDonald's has widened their menu in which customers can find various food as well beverage items along with coffee which pull in customers with healthier choices. In order to attain positive customer feedback, they offers free Wi-Fi facility (Prajogo, 2016).
- The most breakneck threat for McDonald's is economic recession due to which global fast food industry is in danger. Due to low income levels, customers prefer to intake normal cheap food instead of branded products. This factor affects sales and revenue margin of this company.
- Working in an growing industry, McDonald's has to face cut-throat competition, some of their competitors are Subway, Burger king, Wendy's etc. These brands seek attention of customers by offering low priced products and better services.
- Another threat for McDonald's is growing public health crises. Due to growing problems of obesity and other health issues, society is avoiding fast food and switching over green and organic products.
- Every organisation has few responsibilities towards society and environment which are needed to be fulfilled. McDonald's uses HCFC-22 which is harmful for the environment, in order to continue positive brand image they have to restrict the use of harmful ingredients (Sena Ferreira, 2012).
- Fluctuations in interest rates, foreign exchange rates are also few threats to McDonald's.
P6 Interrelation of strength and weakness with external macro factors
Macro environmental factors, which influence business activities of McDonald's are political, economical, technological, social,legal and environmental which has respective strengths and weaknesses which are explained below:
Political: Political factors are governmental policies which are different in every country. Examples of these influencers are changing laws, policies and tax reforms.
- Strengths – McDonald's operate in multiple countries like United Kingdom which helps fast food companies in developing and earning more revenues.
- Weaknesses – McDonald's deals in multiple countries which has different laws about food industry. Asian countries has issues with meat ingredients due to which they have to alter their menu. Every country has different policies about public health which results to be difficult for McDonald's to fulfil.
Economical: Economical factors for McDonald's are economic condition, tax policies, interest rates, foreign exchange rates etc. which influence business activities and the sales revenue.
- Strengths – McDonald's has United States as their main area of operation which has a stable economy. Stable economy leads to higher income levels which influence public to use branded products like McDonald's.
- Weaknesses – Unlike United States, China and United Kingdom has slow and risky economy which results to be a threat for McDonald's. McDonald's import their most of the raw material from African and Asian countries and due to high interest rate they have to pay high cost which leads to low revenue (Siewiorek, 2012).
Social: Social factors are the individual's choices and preferences, religion, culture and status which influence a customer to choose between various competitors.
- Strengths – After 2015, world is enjoying economic stability which has improved income levels of general public due to which they are tend to use branded products which can improve their standard of living. McDonald's is the market leader due to which they have hired a team of professionals who analyse attitudes and preferences of their prospect buyers in order to fulfil their needs.
- Weaknesses – Fulfilling requirements of various customers having different cultural values, religion, social class and preferences is a complex task to perform. Current food trends focus on organic products which are good for an individual's health, McDonald's deals in contrasting goods which has high fat and high calories which has considerably harmful effect on health.
Technological: Technological factors are the technical advancements which helps an organisation to increase their production and sales.
- Strengths – McDonald's has initiated their sales on digital platforms where customers can order their products by a single click. In order to promote their online order portals, they have offered various discounts schemes. McDonald's has grabbed the opportunity to market their products on cost effective social media platforms like Facebook, You tube, Instagram etc., these marketing strategies attracts a lot of customers mainly youth. McDonald's has an efficient team which overlooks research and development activities of the organisation.
- Weaknesses – Technological advancements are considered as key to success, but every company works in order to attain success tries to be the best when it comes to technology. Competitors of McDonald's like Subway and Burger king has an innovative technology of customised food products which even attracts regular customers of McDonald's.
Legal: Legal factors are the laws and legislation which a company needs to follow.
- Strengths – Being multi national company, McDonald's has its own legal team which look after all the law related issues.
- Weaknesses – There are thousands of employees working with McDonald's due to which they have to follow all laws like minimum wages act and employee compensation act. McDonald's also has to fulfil its corporate social responsibility which sometimes can result in financial burden ( Smith, 2016).
Environmental: Environmental factors include several weather and climate changes. Temperature and natural disastrous events are also accounted in these factors.
- Strengths – In order to build a positive brand image, McDonald's has alter their menu and adds low fat food products too which can attract health conscious customers. McDonald's has also adapted various strategies like sustainable business practices.
- Weaknesses – McDonald's is a fast food company which focuses on taste rather than health elements which makes it undesirable for health conscious customers. Several environment welfare organisations claims that McDonald's uses non biodegradable components which has negative impact on the environment.
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From the above project report, it has been concluded that business environment is the internal and external surrounding of an organisation. McDonald's is an American fast food company which has few strengths, weaknesses, opportunities and threats. Macro environment factors can have positive as well as negative impact on business activities, which are political, economical, social, technological, legal and environmental which are interrelated with strengths and weaknesses.
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